Mortgage insurance stocks including MGIC and Radian Group dropped as the FHFA moves to make it easier for homeowners to cancel PMI, threatening a key revenue stream for the sector.
Shares of mortgage insurer MGIC fell 4.6% after FHFA's Bill Pulte announced plans to make it easier for borrowers to cancel private mortgage insurance.
Enact Holdings slid 2.2% as the policy change to allow proactive PMI cancellation notifications threatens mortgage insurance revenue.
Radian Group slipped 2.6% after the FHFA announced Fannie Mae will align with Freddie Mac's policy to proactively notify borrowers eligible to drop mortgage insurance.
Essent Group fell 1.9% on concerns that easier PMI cancellation will reduce premium income for mortgage insurers.
Shares of major mortgage insurers fell on Tuesday after the Federal Housing Finance Agency announced plans to allow loan servicers to proactively notify borrowers when they qualify to drop private mortgage insurance. The policy change aligns Fannie Mae with Freddie Mac, potentially reducing premium income for insurers as more homeowners cancel unnecessary coverage.
Investors fear that proactive notifications will lead to a higher volume of borrowers canceling their private mortgage insurance, thereby reducing the long-term premium income for companies like MGIC and Radian Group.